On Doctors, Mechanics, and Computer Specialists: The Economics of Credence Goods
Dulleck and Kerschbamer set out the economics of credence goods in the Journal of Economic Literature. A credence good is one whose quality the buyer cannot judge even after buying and using it, the stock cases being a car repair, a dental filling and a computer fix, because the expert diagnoses the problem and then sells the remedy for it. This is a review of a literature rather than an experiment, so it has no sample and tests nothing itself. What it contributes is the structure and the failure modes that follow from it: undertreatment, where the buyer is sold less than the problem required, overtreatment, where they are sold more, overcharging, where they are billed for work that was not done, and at the limit a market that fails because nothing the seller says can be checked. The paper then sets out the conditions under which liability, verifiability, reputation and competition are each supposed to discipline such a market. Its standing is that of a widely cited synthesis in a review journal, which makes it the right citation for the framework and the wrong one for evidence that any of those remedies works. The same authors put that question to an experiment five years later, and that paper is summarised on this site as well.
Dulleck and Kerschbamer set out the economics of credence goods in the Journal of Economic Literature. A credence good is one whose quality the buyer cannot judge even after buying and using it, the stock cases being a car repair, a dental filling and a computer fix, because the expert diagnoses the problem and then sells the remedy for it. This is a review of a literature rather than an experiment, so it has no sample and tests nothing itself. What it contributes is the structure and the failure modes that follow from it: undertreatment, where the buyer is sold less than the problem required, overtreatment, where they are sold more, overcharging, where they are billed for work that was not done, and at the limit a market that fails because nothing the seller says can be checked. The paper then sets out the conditions under which liability, verifiability, reputation and competition are each supposed to discipline such a market. Its standing is that of a widely cited synthesis in a review journal, which makes it the right citation for the framework and the wrong one for evidence that any of those remedies works. The same authors put that question to an experiment five years later, and that paper is summarised on this site as well.
Written from the citation as recorded when this source was checked.
What our sources record
Reproduced as it was written when this source was checked, figures and all.
Dulleck, U., & Kerschbamer, R. (2006). 'On doctors, mechanics, and computer specialists: the economics of credence goods.' Journal of Economic Literature. A review setting out the asymmetric-information structure and its failure modes. Verified at the published record 2026-10-05. doi:10.1257/002205106776162717
Where we use it
- The Thing You Cannot Judge, Why We Look
Reliability of this reference
The link below was matched against the publisher's record on title, first author and year, and all three agree.
The source
https://doi.org/10.1257/002205106776162717
DOI: 10.1257/002205106776162717